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Q&A with Helaine Olen, author of 'Pound Foolish'

In "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry," journalist Helaine Olen offers a feisty exposé of what she calls the "personal finance industrial complex" and the financial empires it has spawned for such gurus as Dave Ramsey, Suze Orman and David Bach. The book, published in January by Penguin, has received mostly rosy reviews from the Economist, the Washington Post, the New York Times and Reuters, among others.

No stranger to the industry herself, Olen penned a popular Money Makeover column for the L.A. Times in the 1990s, dispensing such columns as "Self-Taught Young Investors Are Well on Their Way to Achieving Their Goals," "For Prudent Spenders, a Shift in Strategies Should Do the Trick" and "Southern Californians Learning How to Succeed in Personal Finances."

Olen's freelance work has appeared in numerous publications, including BusinessWeek, Forbes, Salon, Slate and The New York Times. This interview has been edited and condensed.

In what ways do people get hurt by listening to these personal finance gurus?

Almost all of these people are massively conflicted and are selling you stuff. Dave Ramsey’s radio show is essentially a three-hour commercial for the Lampo Group (Ramsey's company).

Suze Orman was marketing her pre-approved debit card. She sells will kits, all sorts of stuff. One of her things is, very reasonably, “Don’t buy a new car.” Well, guess who appeared in a commercial for a $40,000 new Acura last fall?

There are huge conflicts here. You turn over a rock and 14 snakes come out.

If you could choose just a couple of data points from your book that would help the public, what would they be?

Almost none of us have more than $100,000 saved for retirement.

And the reason we have not been doing particularly well is not because we’re a bunch of financial ... slackers who won’t give up our lattes, but because these plans came of age in the 1980s.

There was an explosion in financial innovation and, at the same time, the income inequality gap started to open, even as the cost of education, health care and housing went up at rates well beyond that of inflation for several decades, making it almost impossible for anyone to keep up.

The savings rate in 1980 was 10 percent and it starts to fall right at that point. By the early 1990s, it’s already in the low single digits. You have to ask, “What went wrong? What happened?” People didn’t go on a collective bender.

To what extent do we consumers have to hold ourselves accountable? Can’t we benefit by listening to people who tell us to cut back our expenditures?

I would never argue that someone should live beyond their means. But I would point out it’s really hard to live within your means when you have a $300 a week unemployment check.

The point is there is this great myth out there that Americans went on a financial bender. The leading cause of bankruptcy is not buying lattes, it’s health care, followed by the usual fractured families, unemployment, sort of all of the plagues of the 21st century — economic plagues.

We kind of have this misnomer that people are spending their money. What is going up, again, at these crazy rates, are things like pharmaceutical goods.

To what extent are personal finance gurus responsible for that? It seems their focus is on what they believe they can teach or control.

It depends on if you think this is a self-help problem or a political problem. I believe it is a political and economic problem.

Self-help gurus are basically saying, “Yeah, the economy (is poor), but you’re in it on your own, and therefore you should be able to solve this on your own.” Realistically, that’s just not true for most people.

Dave Ramsey tells people, “You can choose not to participate in a recession.” That’s not possible.

By preaching this message, they’re encouraging people to not see their problems in a greater context. You don’t see yourself as part of a group, you see yourself as alone.

They’re all acting as their own entities, their own companies, their own brands. To what extent is this merely a case of them participating in our commercial culture of marketing, advertising, self-promotion, branding? Aren’t they just following that model that we have?

That is absolutely and completely untrue. I’m sorry, but I just don’t believe that. I don’t. Suze Orman is not a corporation.

She’s a self-proprietor. She’s a company. I’m not trying to make the point that corporations are people. But, it seems that she’s following the model that Corporate America uses.

Right, absolutely. But the person who is most getting rich off of her advice is her, not you. Just because it’s out there doesn’t make it right.

I just see Oprah ...

There’s a big difference between you branding yourself for freelance writing versus selling people on financial products that may or may not be good for them. People try to draw these comparisons and I just don’t believe it. I’m not selling anybody anything.

If you look at the food industry, people are selling people things that not only they don’t need, but that actually hurt them.

Do you think that’s right?

No, I think it’s a broader issue, a mindset.

It’s part of a broader issue, but I didn’t write a book about the food industry. I draw a very clear analogy between the food industry and personal finance industry at the end of the book.

The most obese people in our society are lower-income people. Food is filled with junk and people eat it. Good food costs money. It costs more money than bad food.

There are actually studies that show that it’s not more expensive to eat healthfully than it is to eat a fast-food diet, for example.

There’s a lot of different data points around this. The fact is, these people are promoting things that might be good products in some cases, but most people have no way of knowing. The financial ignorance out there is profound.

So people who are looking for a financial planner — who want to educate themselves and do what they can — what would you say to them?

You ask whether someone has a fiduciary duty to you. If they don’t, find somebody else. Fiduciary duty, as you know, means “act in someone’s best interest.”

The vast majority of brokers out there have no such standard. They work to something called “suitability standard,” which means they can sell you anything as long as it’s vaguely OK. I beg people to ask about the fiduciary rule when they’re asking for advice. It’s absolutely the most important question you can ask.

A friend of mine had a marketing professor who told him, “We have fiduciary responsibility to separate the fools from their money.” That seems to be the general mindset of marketing at large. Doesn’t it highlight the need for personal responsibility?

No, it highlights the need for laws to protect people. It does not highlight the need for personal responsibility at all because the financial services industry will forever remain one step ahead of those people.

The idea that you’re going to educate people to keep up with this stuff is almost ridiculous. I mean it’s really not possible. And all of this is a way of talking around the fact that what we need is to simply protect people.

The complexity has skyrocketed since the early 80s. But certainly people don’t have to invest in complex vehicles.

But they’re told that these (financial instruments) are really great things. And these brokers come in and they present themselves as friends, and one other thing you’re forgetting — financial smarts peak in people’s early 50s. So not surprisingly, elderly people get taken advantage of constantly.

Generally, all marketing does this. They’re trying to get people to indulge, trying to get people to buy things they don’t need.And I think there is a lot that people can do to discipline themselves. They don’t have to buy the Big Mac, they don’t have to buy an SUV ...

But that’s not the problem. We have study after study showing that’s not the problem. The problem is that people’s salaries are falling and they continue to fall. The vast majority of the gains since 2008 went to the top 10 percent.

But that’s a separate issue from personal finance. Those are macroeconomic issues.

I would say it’s the same thing. We might disagree about that.

OK. I do want to hear you speak to the reform issue because that is something that comes out a lot in your book. What reforms do you think we should be discussing?

The thing I suggest in the book is that we start talking about this honestly. We have next to no class mobility in this country. As I like to say, Horatio Alger (a 19th-century American author of "rags-to-riches" tales) is a writer of fiction. That we believe this fiction is one of the reasons why we feel so isolated in the world.

I don’t make tons of recommendations. I believe very strongly that the fiduciary responsibility needs to be expanded, that commission sales of products needs to be ended, that I don’t think people should be allowed to go on TV or the radio and basically function as commercials for their own financial empires and so on.

Public discourse is something that is really valuable. But you don’t get into specific policy recommendations.

I basically just wrote an entire book — 86,000 words — saying, “There’s no 10 tips to get ahead financially. This doesn’t work. You’ve been scammed, people.” I felt the last thing I could do was end the book on 10 tips.